Indeed. Sometimes it may be possible to buy a life insurance policy on the pensioner which is enough to replace the survivor income, for less than the monthly cost of taking the joint-and-survivor option. When that is the case it can indeed make sense to forego all survivor income, take the higher pension payout and get some life insurance with the increased pension payments.
And I will put a spreadsheet to this when the time comes (~ 5 years away for me). But a quick back-of-the-envelope check a while back indicated that the pension adjustment is just a straight actuarial calculation based on a large group. Which seemed obvious in hindsight - the pension managers aren't really trying to 'bet' one way or the other, they want that choice to be revenue neutral to them. So I'm doubting that any insurance company is going to offer me anything better, after their profit/overhead. But I will look, maybe there are other factors involved.
I'm also assuming that spousal benefits are the default for corporate pensions, this might be baked into the pension laws? My MegaCorp pension is that way, with the spouse needing to sign off for reduced benefits. Again, I'll need to do the math, on one hand I lean towards a high spousal benefit to provide 'longevity insurance' for DW. OTOH, seeing as it is not COLA'd, maybe I'm better off taking the money now to build the nest egg. It's not going to be cut and dried, now you've got two separate lifespans affecting the numbers, and real return assumptions, inflation, etc Maybe I'll just flip a coin.
Another consideration - if I'm thinking through this clearly, there is a side benefit to delaying a pension if you can (assuming the rates go up each year). My pension (and I assume others), will default to a 50% survivor if I die before taking any pension. So that seems like somewhat of a (morbid and long-shot) freebie. DW would get the higher benefit, and I never took a reduction in pension payments (of course, I didn't get ANY payments!). But the higher amount for life could easily outweigh a few years of payments.
Don't forget about the change from MFJ to single filing status. That can sometimes increase your tax bill rather massively, even on modestly lower income.
Wait a minute, weren't we talking about the 'marriage penalty' in another thread? Now there's a 'singles penalty'!!?? Those Feds think of everything! We can't win!
OK, so I guess the 'marriage penalty' kicks in at high incomes (deduction limits and tax brackets), and the 'singles penalty' kicks in at low/moderate income (not sure - standard deduction/allowances make the difference?)?
-ERD50